Friday, 20 April 2007

FNV paper on SRI, hedge funds & private equity

FNV has translated its report on socially responsible investing, hedge funds and private equity (which was mentioned in the IPE.com story circulated on w-c-l mid-March) into English. It is available for download below.

Some highlights:

After several years focussing on "structural pension issues" in the Netherlands, FNV is once again examining pension investment and responsible investing issues. As indicated on page 5, "[FNV] policy must focus more on the way the investment process is to be shaped." The 12-page report mentions some interesting points, in particular:

* FNV reasserts its belief in, and commitment to, the three P’s of "Profit, People and Planet" approach to sustainable investing (page 1) [However, the VBDO report highlighted below, "Voting on sustainability by 8 large Dutch institutional investors," suggests that large Dutch pension funds are voting against ESG issues raised in US shareholder resolutions 84% of the time.]

* "Another point of interest is how FNV can come to a more aggressive approach in its investment policy [...] Not that the FNV is not aware that trade unions take up a different position in their role as representative of employees than in their role on the board of a pension fund. The FNV wishes to balance both positions as well as possible. In this respect, corporate social responsibility and socially responsible investments could have an important bridging function" (page 5);

* "Pension funds must make high demands on the socially responsible investment policy of internal and external asset managers." (page 9);

* On the differing Anglo-Saxon and Dutch approaches to union approaches to investment policy: "the two approaches are now clearly growing towards one another. The general approach increasingly exists of a mix of structure and real targets, as well in Anglo-Saxon countries as in continental Europe.The FNV will therefore have to detail and implement actual targets in its policy. Special attention must be paid to the number of sectors/companies that increasingly try to exclude the trade union when it comes to determining the working conditions for business-related services. This could imply that Dutch pension funds increasingly call anti trade union companies to account according to the Anglo-Saxon approach. It is often possible to join the activities of sister organisations." (page 11);

* "In 2007, the FNV will systematically focus more on its role in the executive boards of pension funds. The FNV will particularly focus on issues with regard to socially responsible investments and corporate governance. The FNV will unite the forces and will equip the trade unions, which assist the executive boards of unions in pension funds, with facilities." (page 12)

Private equity

FNV takes a nuanced view of private equity, acknowledging the range of PE investments and productive roles PE can play in the capital markets. However, "a number of private equity funds seem to evolve from medium-term investors to (very) short-term investors. This requires for the pension funds – in their role as investor - to become more observant with regard to the social aspects of such an investment strategy. [...] Private equity companies should report just as much on their ‘People’ and ‘Planet’ activities as large companies that are quoted on the stock exchange and the pension funds must also strongly request that they do so and assess these private equity companies based on the received information." (pages 7-8)

Hedge Funds

FNV criticizes investments in activist hedge funds that aim to produce short-term returns at the expense of employees’ rights. "The FNV fundamentally disapproves of investments in hedge funds which in fact are intended to obtain a seat in the company’s management. This would cause for the executive board of pension funds to become (indirectly) responsible for the company’s policy and thereby withdraw from its role as shareholder. The executive boards of pension funds simply do not have the means to do so and this would result in an undesirable and complex entanglement of responsibilities." (page 9)

(Main points summarized by CWC Secretariat, with thanks to Chris Driessen for translating the FNV report into English.)

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About Me

I work at the International Transport Workers Federation on capital stewardship. I'm interested in developing a stronger voice for labour in the capital markets, responsible investment and corporate governance.
This blog represents my personal views only.